Sen. Ralph Recto yesterday reiterated his proposal to raise the tax exemption ceiling on Christmas bonuses and 13th month pay to P60,000 from the current threshold of P30,000 to give more spending power to employees celebrating the holiday season.
Recto, in a press release, said the tax imposed on bonuses and allowances exceeding P30,000 is outdated since it was pegged when the basic salary scale of state employees was only P2,800 and the salary of the Philippine President was only P25,000.
Currently, the basic pay scale of government employees is P8,287 while the salary grade of the chief executive is P120,000, the press release said.
“This is the kind of a one-tier increase that all advocates and lobbyists – foreign-funded or not – should be championing,” he said.
Recto said that putting a tax on bonuses and allowances that exceed P30,000 is tantamount to treating a job well-done a “sin” and employers’ generosity a “felony.”
“A worker bound to receive a little more than P30,000 in bonuses and allowances should not be penalized with a tax. The tax is essentially a disincentive for workers aspiring for a higher pay scale that naturally comes with generous perks and bonuses,” he said.
The 1997 National Internal Revenue Code Section 32(B) Chapter VI states that private and government employees having bonuses beyond P30,000 were automatically subjected to income tax, the press release said.
Recto’s Senate Bill 2879 seeks to shatter the threshold of P30,000 so that bonuses and allowances up to P60,000 would be exempt from income tax, it added.
If inflation is factored in, the P30,000 tax exemption ceiling is practically worth P15,000 today as computed by the National Economic Development Authority, which he chaired before getting elected to the Senate in 2010, Recto said.
At least three Regional Development Councils have expressed support to the Recto bill, the latest of which is the RDC –National Capital Region, the press release said.
The first two RDCs are that of Region 2 and Region 6, it added.*